The Bank of England has cautioned that the UK's economic recovery from the coronavirus pandemic could be more challenging than previously anticipated, as new data reveals a 50% drop in job advertisements. Governor Andrew Bailey indicated that further quantitative easing may be necessary, casting doubt on the prospects of a swift rebound.
According to the Office for National Statistics, online job ads halved between March and May. Additionally, only 14% of businesses that have ceased trading expect to resume operations within the next fortnight, and those that do plan to bring back just 31% of furloughed staff. The government is currently supporting a third of the workforce, with 8.4 million jobs on furlough and 2.3 million self-employed individuals receiving grants.
Since the crisis began in March, the Bank has cut interest rates to a historic low of 0.1%, announced a £200 billion expansion of quantitative easing, and taken steps to ease financial pressure on large companies and facilitate bank lending. In an article for the Guardian, Bailey stated he is willing to go further, while downplaying the possibility of negative interest rates.
Bailey wrote, 'No one can be sure exactly how the pandemic will unfold. There are reasons to believe that economic activity will return at a faster pace than in many past recessions, but this depends on how the measures continue to be eased, what degree of natural caution is shown by people, and how much longer-term damage is done to the economy.' He added, 'The risks are undoubtedly on the downside for a longer and harder recovery.'
The Bank has predicted the UK will suffer its worst recession in 300 years, comparable to the Great Frost of 1709. However, it had previously suggested a rapid recovery as lockdown restrictions ease. Bailey noted some uptick in road travel since social distancing measures were relaxed, but most indicators remain subdued.
